Middle East firm to pay less for AMD stake

Hammered by its falling stock price and slumping PC demand, Advanced Micro Devices Monday said it has agreed to cut the price of stock set to be purchased by Abu Dhabi's Mubadala Development Co. In addition, the company said it is taking a smaller stake than planned in the manufacturing operation it is creating with Advanced Technology Investment Co., also based in Abu Dhabi, United Arab Emirates.

Mubadala, which already owns 8.1 percent of struggling AMD, agreed in early October to pay US$314 million to increase its stake to 19.3 percent by purchasing 58 million newly-issued AMD shares, as well as warrants for 30 million additional shares. The announcement came at the same time AMD said it was spinning off its manufacturing operations into a separate company to cut costs and get an infusion of capital.

AMD said Monday that Mubadala will now pay a price equal to the lower of the average closing price of AMD's common stock from the 20 days ending Dec. 12, or the 20 days before the deal closes. The firm will also get an additional 5 million warrants.

AMD was trading at US$2.12 mid-day Monday, just about half of the US$4.23 closing price on October 6, the day before the deal was announced. The move is meant to help the money-losing AMD compete better against rival Intel by shifting the battle to chip design, rather than manufacturing, which is hugely capital-intensive.

AMD's stake in The Foundry Co., the temporary name for the manufacturing spinoff, will be cut to 34 percent from 44 percent. ATIC's share in the operation increases from 55.6 to 65.8 percent. AMD said ATIC, owned by the government of Abu Dhabi, will pay the same price agreed upon earlier for the smaller stake -- US$2.1 billion, of which US$1.4 billion will be invested in the joint business and US$700 million directly into AMD.

The move comes as research firms such as iSuppli are cutting their projections for PC market growth in 2009.

PCW Evaluation Team

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